Page 87 - PRIAA Glossary

INDEX ARBITRAGE
The simultaneous purchase (or sale) of an index derivative
and the sale (or purchase) of some or all of the component securities that make up the particular index to profit
from sufficiently large inter-market spreads between the component securities and the index itself. See also “arbitrage”.
INDEX SPONSOR
The investment bank or other entity that conducts market research and creates and administers an index.
INFLATION-INDEXED DEBT INSTRUMENT
Investment products designed as a means to protect potential investors from the risk of changes in inflation, by linking cash flows (principal & interest) to the associated consumer price index (CPI). While protecting against inflationary movements, the bond still provides investment exposure to movements in credit (issuer) quality or changes in interest rates. Treasury Inflation-Protected Securities (TIPS), issued by the FED and tied to the US CPI index, are well-known examples of this investment vehicle.
INFLATION-LINKED DERIVATIVES
Derivative contracts where the underlying is a price index or one of a series of government-issued, inflation-protected securities such as Treasury Inflation Protected Securities (TIPS) issued by the US Treasury.
INFORMATION RATIO
Measures the investment manager’s ability to outperform
a particular set benchmark. IR is calculated from the difference between the return of the investment portfolio (or security) and benchmark, divided by the standard deviation of the difference between the return on investment and
the benchmark.
INITIAL MARGIN REQUIREMENT
The amount of collateral required up front in order to open a position.
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